A risk that engulfs international investments as reflected in the volatility of returns due to events pertaining to a specific country as opposed to events associated solely with a certain economic or financial agent operating within an economy. For example, cross-border risk may arise when an entity is unable to receive payment from its customers in relation to a contract or agreement as a result of restrictions imposed by a government on the convertibility and transferability of funds denominated in a foreign currency.
Cross-border risk arise from events associated with a particular country, rather than a particular customer.
